CONCEPTUAL FRAMEWORK

In order to hold existing and new knowledge, theory should provide a conceptual framework, so that

knowledge can be interpreted for empirical application in a comprehensive manner. In this study the

conceptual framework comprise of four independent variables and one dependent variable.

INDEPENDENT VARIABLES DEPENDENT VARIABLE

Credit Policy
 Credit Standards
 Credit Terms
 Collection Efforts

Accounts Payable Practices

 Relationship with Suppliers
 Payment Period
 Delays in Payment

Inventory Control Practices Profitability

 Inventory Levels
 Inventory Control System  Return on Assets

Liquidity Management Practices

 Current Ratio
 Quick Assets Ratio
 Cash (Ratio) Management

Efficiency Management Practices

 Accounts Receivable Turnover
 Inventory Turnover
 1:Assets
Figure Turnover
Conceptual Framework

Figure 1: Conceptual Framework

Figure 1 shows the conceptualization of the dependent and independent variables of the related study. The

independent variables of this study indicate the statistics that were used to measure effects of Working

Capital Management. They include credit policy which was measured by credit standards, credit terms,

collection efforts and creditworthiness of customers. Accounts payable practices were measured by

relationship with suppliers, delays in payments and payment period allowed by suppliers. Inventory

control practices were measured by inventory control system and inventory levels. Liquidity management

practices were measured using current ratio, quick ratio, and cash (ratio) management. Efficiency

management practices were measured using accounts receivable turnover, inventory turnover, and assets

turnover. The dependent variable was the profitability which was measured by return on assets (ROA).